“Service Charge” levied by restaurants are NOT mandatory, pay only if satisfied ; Govt issues clarification

After dining in a restaurant, the bill that we get has a slew of various taxes (which go to the government) and “service charge”. While the taxes are collected by the government and are mandatory, the service charge is levied by the restaurant and is NOT mandatory. As per the recent clarification by the department of consumer affairs, the service charge is optional and the onus is on the customer to pay the service charge levied. In case the customer feels services were not satisfactory, the customer has the right to not pay the service charges.

As per the recent press release by Press Information Bureau (PIB), a number of complaints from consumers have been received that hotels and restaurants are following the practice of charging ‘service charge’ in the range of 5-20%, in lieu of tips, which a consumer is forced to pay irrespective of the kind of service provided to him. The Consumer Protection Act, 1986 provides that a trade practice which, for the purpose of promoting the sale, use or the supply of any goods or for the provision of any service, adopts any unfair method or deceptive practice, is to be treated as an unfair trade practice and that a consumer can make a complaint to the appropriate consumer forum established under the Act against such unfair trade practices. In this context, the department of Consumer Affairs, Central Government has called for clarification from the Hotel Association of India, which have replied that the service charge is completely discretionary and should a customer be dissatisfied with the dining experience he/she can have it waived off. Therefore, it is deemed to be accepted voluntarily.

The Department of Consumer Affairs has asked the State Governments to sensitize the companies, hotels and restaurants in the states regarding aforementioned provisions of the Consumer Protection Act, 1986 and also to advise the Hotels/Restaurants to disseminate information through display at the appropriate place in the hotels/restaurants that the ‘service charges” are discretionary/ voluntary and a consumer dissatisfied with the services can have it waived off.

Kshitij Mohan


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